Judge Finds California’s Ethanol Law Unconstitutional

DC Dialogue

Court finds that low carbon fuel standard discriminates against out-of-state corn-derived ethanol.

Published on: December 30, 2011

A judge in Federal District Court in Fresno, California, made a ruling Dec. 29 that the State of California’s Low Carbon Fuel Standard (LCFS) is unconstitutional. Judge Lawrence J. O’Neill agreed with the arguments that the LCFS is in violation of the Commerce Clause the U.S. Constitution.

In a joint statement, Renewable Fuels Association president and chief executive officer Bob Dinneen and Growth Energy CEO Tom Buis said: “The state of California overreached in creating its low carbon fuel standard by making it unconstitutionally punitive for farmers and ethanol producers outside of the state’s border. With this ruling, it is our hope that the California regulators will come back to the table to work on a thoughtful, fair, and ultimately achievable strategy for improving our environment by incenting the growth and evolution of American renewable fuels."

The groups filed their suit on December 24, 2009 and asserted that the California LCFS violates the Commerce Clause by seeking to regulate farming and ethanol production practices in other states. The Commerce Clause specifically forbids state laws that discriminate against out-of-state goods and that regulate out-of-state conduct. With its original filing, the groups noted, “The LCFS imposes excessive burdens on the entire domestic ethanol industry while providing no benefit to Californians. In fact, in disadvantaging low-carbon, domestic ethanol, the LCFS denies the people of California a genuine opportunity to clean their air, create jobs, and strengthen their economic and national security. One state cannot dictate policy for all the others, yet that is precisely what California has aimed to do through a poorly conceived and, frankly, unconstitutional LCFS.”

On this claim the Court found that the LCFS discriminates against out-of-state corn-derived ethanol and impermissibly regulates extraterritorial conduct. As a result, the Court issued an injunction. Judge O’Neill also ruled that CARB failed to establish that there are no alternative methods to advance its goals of reducing GHG emissions to combat global warming.

The ruling allows CARB to appeal Judge O’Neill’s decision immediately to the U.S. Court of Appeals for the 9th Circuit. RFA and Growth Energy said they will defend the Judge’s decision that the LCFS is unconstitutional in any appeal that may be filed by CARB.

In March, Nebraska Attorney General Jon Bruning drafted an amicus brief and led a coalition of six states arguing the unconstitutionality of California's Low Carbon Fuel Standard. Nebraska was joined by Kansas, Michigan, Missouri, North Dakota and South Dakota.

"We applaud the District Court for recognizing that California's standard wrongfully discriminates against Nebraska corn growers and ethanol producers under the dormant commerce clause," said Bruning. "We will continue to fight for a level playing field for all of Nebraska's agricultural producers."

The LCFS assigns a higher carbon intensity score to ethanol produced in the Midwest. This will close the California market to ethanol produced in the Midwest in favor of chemically-identical ethanol produced within California, without any legitimate justification.